Bumi Says $201 Million Missing After Review of Berau Funds

Bumi Plc Chief Executive Officer Nick von Schirnding said in an April 22 interview that as many as 60 people including auditors from PriceWaterhouseCoopers and Ernst & Young were working on the Berau probe, which he expected would take as long as 10 days to complete. Photographer: Simon Dawson/Bloomberg

May 31 (Bloomberg) -- Bumi Plc, the coal producer at the
center of an ownership dispute between its founders, said a
review of the books at one of its two Indonesian units found
$201 million of spending with “no clear business purpose.”

About $152 million was determined to be missing from PT
Berau Coal Energy’s finances in 2012 and $49 million from a year
earlier, Bumi said in a statement. The Berau Coal review delayed
Bumi’s results by more than two months. It today reported a net
loss of $2.3 billion for 2012, compared with the year-earlier
loss of $337 million, after booking charges of $2.2 billion on
its Indonesian coal businesses.

“This happened at various levels in the organization, it
happened around procurement, around certain contracts, and so we
are investigating those parties,” Chief Executive Officer Nick
von Schirnding told reporters in London. “We are doing quite a
significant amount of work in terms of getting restitution. I’m
not here to be popular, I’m here to sort out this mess.”

Bumi has been at the center of a battle for control between
co-founders Nathaniel Rothschild, scion of a centuries-old
British banking dynasty, and Indonesia’s Bakrie family since the
$3 billion deal that brought them together started to sour in
late 2011. Trading in the stock will remain suspended while the
company “continues to enhance its internal systems and
controls,” it said today.

Indonesian Charges

“This is rightly a major concern and the company has some
work to do to restore investor confidence, but significant
progress has been made since new management took over at the
beginning of the year,” Richard Knights, an analyst at Liberum
Capital Ltd. in London, said today by phone. “Structures are
being put in place to make sure that payments that didn’t have a
clear business purpose will not be reoccurring.”

Rothschild today called on Chairman Samin Tan to
immediately resign from the board and described the situation as
“absolutely appalling.”

“We’ve established now there has been clear fraud at Berau
and the Plc board has been astonishingly slow to act,” he said
in a phone interview.

Separately, Bumi said former director Rosan Roeslani, who
resigned from the board and his role as president director of
Berau Coal in December, received “substantially more” in
salary, bonuses and other benefits than had previously been
disclosed. He was paid $3.8 million in 2011, according to Bumi’s
annual report, published today. In last year’s annual report
Roeslani was said to have received $700,638 in salary and bonus
for 2011.

Disclosure Failure

“The Board is reviewing the validity of all these payments
and the failure to disclose them, and will pursue all
appropriate remedies for recovery if they are not valid, and all
sanctions that may be available for non-disclosure,” Bumi said.
Roeslani also received a termination payment of $322,971 this
year after leaving Berau, which was “made without the knowledge
of the board of Bumi Plc and recovery will be pursued if it
should not have been made,” it said.

Roeslani couldn’t immediately be reached by phone and e-mail for comment. He is an investor in PT Idea Karya Indonesia.
PT Idea and Bloomberg LP are partners in Bloomberg Television’s
Indonesian-language service.

Robin Renwick, a vice chairman of investment banking at
JPMorgan Chase & Co., won’t seek re-election to the board at
next month’s annual general meeting, Bumi said in its annual
report. Graham Hearne will also resign from the board, it said.

Impairment Charge

Bumi took an impairment charge of $815 million on its 85
percent stake in the Berau assets, and one of $1.4 billion on
the value of its stake in PT Bumi Resources, where it owns 29
percent. Bumi Resources, the biggest coal producer in Indonesia,
reported a net loss of $666.2 million for 2012 as lower coal
prices hurt sales.

Bumi said last month it hadn’t uncovered any “black hole”
during a probe of the Berau Coal unit, Indonesia’s fifth-largest
producer of the fuel. Von Schirnding said today he couldn’t make
any promises on reclaiming the missing funds and that it’s
possible none of the money will be recovered.

Bumi shares, which plunged 69 percent last year, closed at
259.3 pence on April 19, the last day they were traded, giving
the company a market value of 625 million pounds ($952 million).

CFO Resigns

The venture said April 12 it had been unable to verify some
spending at Berau Coal. Four days later Bumi Chief Financial
Officer Scott Merrillees said he would resign on June 26, the
date of its annual general meeting. Berau’s management team is
overseeing a full audit and is verifying contracts signed by the
Indonesian company, Bumi said on April 22.

The unaccounted-for spending at Berau included $79 million
attributed to roads and construction, $42 million to land-related payments and $5 million of goodwill, London-based Bumi
said today. A further $24 million of consulting costs were
reclassified to other exceptional costs, it said.

“Indonesian legal advisers have been instructed by the
company to provide a full report to the Litigation Committee on
all options available to PT Berau to seek recourse and take
appropriate action against wrongdoers,” Bumi said today. “The
company is also engaged in discussions to attempt to recover
what the board considers to have been inappropriate
expenditure.”

Palm Oil

Von Schirnding said in an April 22 interview that as many
as 60 people including auditors from PriceWaterhouseCoopers and
Ernst & Young were working on the Berau probe, which he expected
would take as long as 10 days to complete.

Bumi is also working to separate from Bumi Resources, which
is controlled by the Bakries.

The creation of Bumi brought together Rothschild and the
Bakries, a family-owned palm oil-to-property empire founded in
Sumatra in 1942. Waning coal prices, board infighting and probes
in London and Indonesia including an investigation by
Macfarlanes LLP into alleged financial irregularities have
weighed on the stock.

The Bakries have proposed exchanging their 23.8 percent of
Bumi Plc for 29.2 percent of Bumi Resources in a cash-and-share-swap deal, leaving Bumi Plc in control of Berau Coal. Bumi
shareholders were scheduled to vote on the deal at the AGM.

That deadline won’t be met and the company hopes to
complete the vote “before autumn,” CEO Von Schirnding said.

Bumi has previously sought assurances from the Bakries that
they will be able to fund the cash component of their offer, and
Von Schirnding said he’ll be enforcing the terms of the original
October proposal, which included a $278 million cash component.
The Bakries haven’t sought to change the terms, he said today.

The structure of the transaction remains the same, a
spokesman for the Bakrie Group said today in an e-mailed
statement. An initial $50 million payment has been made and the
group “have the balance of the funds available,” the statement
shows.